1. Relevant Authorities and Legislation

1.1 What regulates M&A?

The main statutory framework regulating M&A transactions in Norway consists of the Private Limited Liability Companies Act (“LLCA”), the Public Limited Liability Companies Act (“PLLCA”), and the Partnership Act. Furthermore, tender offers and other transactions involving public companies whose securities are listed on a regulated marketplace in Norway (i.e. the Oslo Stock Exchange, including the Oslo Axess list; collectively, “OSE”) are subject to the Securities Trading Act (“STA”) and the Securities Trading Regulation (“STR”). The foregoing corporate-specific framework is on a case-by-case basis supplemented by various and more general regulations found, inter alia, in the Contracts Act and the Sale of Goods Act (both applicable to most contracts), the Accounting Act and the Income Tax Act (pertaining to transactional tax considerations), the Competition Act (which also covers antitrust), and the Employment Act.

As Norway is a member of the European Free Trade Association (“EFTA”) and the European Economic Area (“EEA”), most EU regulations pertaining to M&A transactions have also been implemented in Norwegian law, thus subjecting cross-border transactions within the EU (involving publicly listed companies) to strict antitrust regulations promulgated and enforced by the European Commission (“EC”) and the EFTA Surveillance Authority (“ESA”). With respect to the foregoing, the Competition Act has corresponding merger control provisions, which authorise the Norwegian Competition Authority (“NCA”) to intervene against anti-competitive concentrations; therefore, from a practical perspective, the “one-stop shop” principle formulated in Council Regulation No. 139/2004 effectively averts unnecessary cross-review by the EC, the ESA and the NCA.

Other relevant EU regulations implemented in Norwegian law include the Prospectus Regulation, the Takeover Directive, the Transparency Directive, the Market Abuse Directive, and the Markets in Financial Instruments Directive (“MiFID”).

1.2 Are there different rules for different types of company?

The STA and STR, applicable to companies listed on a Norwegian regulated market, establish a regime to prevent market abuse and insider trading by regulating prospectus and information requirements, and by providing detailed regulations with respect to tender offers involving listed securities. The rules are supplemented by rules, regulations, guidelines and recommendations issued by the OSE. Mergers and acquisitions of private and unlisted public companies, however, are not subject to such or similar regulations. Those familiar with M&A transactions and methodology in most other parts of Europe will find the Norwegian landscape quite familiar, particularly with respect to public takeovers.

1.3 Are there special rules for foreign buyers?

There are no general requirements or restrictions aimed at foreign buyers. In certain sectors governing vital national interests, however, such as the power and energy sector (including oil, gas and hydropower) and the finance sector (including financial, credit and insurance institutions), there are certain limitations on ownership and business operations. In addition, under the PLLCA, the CEO and at least half of the directors/board members in a limited liability company must either be residents of Norway, or EEA nationals who reside in an EEA State. It is worth noting that at least half of the ordinary directors must fulfil the residential requirement – it will not suffice that solely deputy directors fulfil it, irrespective of how many of them are Norwegian residents or EEA nationals. The Ministry of Trade and Industry may grant exemptions from the residency requirements on a case-by-case basis.

1.4 Are there any special sector-related rules?

In certain industries, there are sector-specific requirements that must be considered, e.g. requirements for public permits, concessions and approvals. As mentioned in question 1.3 above, these industries typically pertain to the safeguarding of vital national interests, such as banking, insurance, petroleum, hydropower, telecommunications, fisheries, and agriculture. An example of sector-specific regulations can also be found in the Norwegian Financial Institution Act. The act regulates the acquisitions of banks, insurance companies and other financial institutions, and continues the former approval regime for acquisition of shareholdings in a Norwegian financial institution exceeding 10%. Such acquisitions must be notified to the Norwegian Financial Supervisory Authority (the “Norwegian FSA”) and require approval from the Ministry of Finance. Approval is also required if the ownership exceeds 20%, 30% and 50%. Such approval may be withheld if the new owner is not deemed sufficiently qualified to be the owner of such an institution.

1.5 What are the principal sources of liability?

1.5.1 Market manipulation

Market manipulation can take place through: (i) the purchasing or selling of financial instruments that gives or is likely to produce false, incorrect or misleading market signals as to the supply of, demand for, or pricing of financial instruments, or which secures the price of one or several such instruments at an unusual or artificial level; (ii) transactions entered into, or trade-orders given, as a result of any form of misleading conduct; or (iii) the dissemination of information through the media (including the Internet) or any other means, which gives or is likely to give false, incorrect or misleading signals regarding financial instruments, including the dissemination of rumours and news, when the person making the dissemination either knew, or should have known, that the information was false, incorrect or misleading. Anyone who wilfully or negligently commits market manipulation may be penalised by a fine or by imprisonment of up to six years. Such violations may also be considered as fraud, which is a felony offence under the Norwegian criminal code.

1.5.2 Abuse of inside information

Trading in financial instruments on the basis of inside information (precise information likely to have a significant effect on the price, that is not publicly available or commonly known in the market) is unlawful. This applies regardless of whether it is carried out wilfully (with intent) or through negligence (by failing to adhere to the duty of care required). This trading prohibition applies to any person, including but not limited to bidders. The prohibition applies only to trades that can be characterised as abuse of inside information. Whether or not the trade constitutes abuse must be assessed in each individual case. Under the STA, the prohibition does not prevent the normal exercise of an option or forward/futures contract upon expiry of the contract. A breach of the insider information trading prohibition may be sanctioned by fines or prison for up to six years. Pursuant to the preamble (30) of the Market Abuse Regulation, access to and use of inside information will not in itself be considered a violation of the insider trading rules in a situation where the bidder has issued a public takeover bid for the purpose of gaining control of the target or proposing a merger with the target. Hence, access to and use of inside information acquired by a bidder during a due diligence process with respect to the target and the public bid in such situations would not, in itself, necessarily constitute abuse of inside information. A bidder receiving inside information, however, has a duty not to disclose such information to unauthorised third parties. A listed target company granting a bidder access to due diligence documentation may thus be obligated to disclose inside information not yet known in the marketplace.

1.5.3 Other sources of liability

Violation of the STA and the STR in connection with tender offers for listed companies, including, in particular, misrepresentation or omission of certain information in the offer document, may lead to financial penalties. In the case of non-compliance with the STA and the STR, the OSE or the Norwegian FSA may impose sanctions, including administrative fines and orders, civil liability and criminal charges. Non-conformity with guidelines and recommendations issued by the OSE, and actions that do not comply with good market practice, may also be criticised by the OSE and lead to attention from the media that can result in considerable (and costly) bad will.

Liability under tort law is also possible, both for the bidder, target and target’s board, but this is rarely seen in Norwegian public M&A.

2. Mechanics of Acquisition

2.1 What alternative means of acquisition are there?

The three most common methods to acquire all shares in a Norwegian listed company are stakebuilding with an ensuing voluntary or mandatory tender offer; voluntary or mandatory tender offer (with or without a preceding stakebuilding); and statutory mergers. It is also, of course, possible to structure a takeover as an asset transaction by which the purchaser acquires the business assets of the target instead of the shares in the target.

2.1.1 Stakebuilding

Stakebuilding is the process of gradually purchasing shares in a publicly traded company in order to gain leverage and thereby increase the chances of a successful subsequent bid for the entire company (i.e. the remaining outstanding shares). It is possible (and fairly common) in a stakebuilding process to seek irrevocable undertakings (pre-acceptances) from key shareholders prior to announcing a subsequent voluntary bid (see below). Such irrevocable undertakings are often collected in preparations for voluntary offers. The irrevocable undertakings are typically drafted as either “soft” or “hard” irrevocables (“Irrevocables”) – the former normally only commits the selling shareholder to accept the offer if no higher competing bid is made, whereas the latter commits the selling shareholder to accept the offer regardless of whether a subsequent higher competing bid is put forward. There is no limitation on the time period during which a stake can be built and, save for strict regulations regarding insider trading, disclosure requirements and mandatory bid rules, Norwegian law has fairly limited provisions governing the process. The aforementioned notwithstanding, it is imperative that the referenced regulations are observed at all times as they can constitute a crucial factor for whether the process succeeds or not. On notification requirements and disclosure triggers in the stakebuilding process, please see directly below, in addition to question 5.2 et seq.

2.1.2.1 Voluntary offer (with or without a preceding stakebuilding)

The most common approach when acquiring a company listed on a Norwegian regulated market is through a voluntary tender offer with a subsequent squeeze-out of minority shareholders. There are no statutory limitations as to what conditions a voluntary offer may contain, which affords the bidder a great deal of flexibility with regards to terms and conditions – such as price, type of consideration (cash, in-kind, share-swap, or a combination) and conditions precedent such as satisfactory due diligence, no material adverse change, governmental approvals, and minimum acceptance requirements (typically acceptance from 90% or two-thirds of the shares and votes). The offer can be subject to financing, but the offer document must include information on how the acquisition is to be financed. Whether to include the whole gamut of conceivable conditions, or only to include limited conditions in order to complete the transaction quickly and avoid competing bids, is entirely at the bidder’s discretion. The bidder may also, if so desired, direct the offer only to a selected group of shareholders. As mentioned above, there are no statutory provisions regarding minimum consideration in a voluntary offer. Nonetheless, and in order to make the offer attractive, it is common to add a 20% to 40% premium on the current share trading price. In previous years, there have been considerable variations in the level of premiums offered in voluntary offers, with some examples reaching premiums of 60% above the average trading price of the preceding 30 days.

If a voluntary offer entails that the mandatory bid obligation is triggered (i.e. more than one-third of the voting rights) if the bid is accepted by those able to make use of it, a voluntary offer in accordance with the rules on voluntary offers shall be made. In this case, certain requirements related to mandatory offers (e.g. offer document, equal treatment of shareholders) will likewise apply for the voluntary offer. If a voluntary offer leads to the exceedance of the mandatory offer threshold, the bidder will also be required to make a subsequent mandatory offer (unless the voluntary offer was made in accordance with the rules on mandatory bids). The voluntary offer document must be pre-approved by the OSE, but the bidder is still free to set the terms and conditions. The offer period for a voluntary tender offer must be at least two weeks but no more than 10 weeks, with a two-week period frequently used as the initial offer period.

The bidder may avoid the situation where mandatory offer requirements are imposed by reserving the right to withdraw or reduce the offer if it is accepted by shareholders holding more than one-third of the voting rights. If an offer is limited to only a very few named shareholders, and such specified offers are not made simultaneously or in connection with each other, neither a voluntary nor mandatory offer may be triggered, depending on the specific circumstances.

2.1.2.2 Mandatory offer (with or without a preceding stakebuilding)

A bidder which directly, indirectly or through consolidation of ownership (following one or more voluntary offers) has acquired more than one-third of the votes in a Norwegian target company listed on a Norwegian regulated market (or in a foreign company listed in Norway but not in its home country), must make a mandatory offer for the remaining outstanding shares. Certain exceptions do apply, the most practical being when shares are acquired as consideration in mergers and demergers. After passing the initial one-third threshold, the bidder’s obligation to make a mandatory offer for the remaining shares is repeated when he passes (first) 40% and (then) 50% of the voting rights (consolidation rules apply). Certain derivative arrangements (e.g. total return swaps) may be considered as controlling votes in relation to the mandatory offer rules.

When entering into a transaction that triggers a mandatory offer, the purchaser must immediately notify both the company and the OSE about the acquisition and inform whether it intends to resell all or parts of the shares or if it intends to make an offer for the remaining shares. The purchaser can avoid the mandatory offer obligation by selling the shares exceeding the relevant threshold within four weeks. If the purchaser does not intend to sell shares, he must prepare a mandatory offer document and cannot, at a later stage, retract or amend his intentions to be a sale of shares instead. Before the mandatory offer document can be issued, it must be approved by the OSE. This normally takes one to two weeks. Once the offer document is issued, the bidder shall afford the shareholders a period of four to six weeks to accept or decline. The share price offered cannot be lower than the highest price paid or agreed to be paid by the bidder for shares (or rights to shares) in the company during the last six months. Notwithstanding the foregoing, the STA provides that the takeover supervisory authority (i.e. the exchange where the securities are listed) may demand that market price is paid for the shares insofar as it is clear that the market price at the time the mandatory offer obligation was triggered exceeds the price offered. However, as the STA provision does not provide sufficient guidance on how this market price is to be calculated, an EFTA court ruling from 2010 found the rule to be non-compliant with the EU takeover rules.

A mandatory offer must be unconditional, and must be for all shares in the company. The consideration may be offered in cash or by alternative means (such as shares in the bidder), provided, however, that shareholders can always require cash settlement at terms no less favourable than the alternative consideration offered. The consideration offered must be unconditionally guaranteed by either a bank or an insurance undertaking authorised to conduct business in Norway. If the bidder acquires 90% or more of the shares and voting rights in the target company, the bidder can unilaterally acquire the remaining shares by a squeeze-out.

2.1.3 Statutory merger

Norwegian limited liability companies may, subject to approval by two-thirds of the shares and votes represented at the general meeting (unless the articles of association require a higher majority), resolve to carry out a statutory merger in which the surviving company acquires all assets, rights and obligations of one or more surrendering companies. The shareholders of the surrendering company can be compensated with shares in the surviving company, or alternatively by a combination of shares and cash (provided that the cash portion does not exceed 20% of the aggregate compensation). If the surviving company is part of a group that in aggregate holds more than 90% of its shares and voting powers, compensation to the shareholders of the surrendering company may consist of shares in the surviving company’s parent or another group company in which the group in aggregate holds more than 90% of the shares and voting powers. It is also possible to carry out a merger by combining two or more companies into a new company established in connection with the merger (statutory consolidation). In such cases, all surrendering companies are dissolved upon completion of the merger.

Norwegian law statutory mergers are not considered a transfer or assignment of the merging companies’ rights and obligations, but rather a continuation of their business. This transaction model may therefore be favourable from a corporate tax perspective as it does not constitute realisation of capital gains.

To carry out a statutory merger, the board of directors in both the surviving and the surrendering company must first negotiate, draft and sign a joint merger plan that describes the terms and conditions of the merger, and then each board must prepare a written report that explains the reasoning behind the merger and how it may affect the company’s employees, etc. Finally, each board must draft a statement to be approved by a certified auditor, detailing the valuation procedure applied when calculating the consideration payable to the shareholders of the surrendering company. The foregoing documentation shall, together with the merging companies’ most recent annual accounts and other pertinent financial information, be sent to the shareholders in each company and registered with the Norwegian Register for Business Enterprises (“RBE”) no later than one month before the merger is presented for approval by the general meeting in each company. Please note that if a Norwegian public limited liability company is involved in a merger, there are more detailed requirements to the content of the above-mentioned reports regarding potential effects for employees, etc. When the merger is approved by the general meetings, it must be reported to the RBE within one month; otherwise, the resolutions will lapse and be deemed void.

Pursuant to EU Directive 2005/56/EC, the aforementioned principles and regulations governing statutory mergers are also available for Norwegian companies merging cross-border within the EU and EEA, and cross-border mergers/demergers between Norwegian companies and companies domiciled within the EU or EEA can also be carried out on a tax-free basis subject to certain conditions. A fundamental condition is that the assets, rights and responsibilities of the Norwegian company (pre-merger or demerger) remain in a Norwegian branch of the foreign company (post-merger or demerger). Public tender offers and other offer structures are nonetheless generally preferred to statutory mergers, since the latter only allows for 20% of the consideration to be in cash, requires more formalities and documentation, and normally takes longer to complete. Still, a statutory merger may be suitable where there is not enough cash available to carry out a mandatory offer with a subsequent squeeze-out of the minority shareholders. Statutory mergers are generally not covered by the rules of public takeovers in the STA. Transactions that do not meet the formal requirements for a statutory merger but are quite similar in form (such as stock-for-stock exchanges) may nonetheless be subject to the STA’s takeover rules if the target company is listed on the OSE.

2.2 What advisers do the parties need?

Both the bidder and target need qualified legal advisers in order to comply with the applicable legal framework and for the preparation of all legal documentation required in the transaction. Depending on the transactional complexity and status of the target company (large, mid or small cap), a bidder will almost always also engage financial advisers to give input on appropriate valuation/consideration and how to structure the takeover. Accountants may also be engaged to analyse the expected post-transaction equity structure based on an outside-in analysis of the target company, or to conduct a financial due diligence, provided that the target grants the bidder such access. Although not a requirement (save in certain circumstances), the target’s board will normally also seek to obtain a fairness opinion from a financial adviser, supporting the opinion that the board is required to make on the offer.

In terms of the settlement under an offer for a publicly listed company, the bidder will need to engage a bank or a stockbroker firm to handle acceptances, clearance and payment in connection with a tender offer process, herewith settlement, in a subsequent compulsory acquisition/squeeze-out.

Other experts that may be required will naturally depend on the type, size, structure, and complexity of the transaction contemplated. Sector-specific specialists (e.g. management, environmental, and other consultants or IT analysts) are brought aboard on a case-by-case basis.

2.3 How long does it take?

In general, M&A transactions do not require consent from Norwegian authorities, meaning that regular share purchases can be completed in accordance with the timeframe agreed upon by the parties. Standard waiting periods pursuant to relevant competition law will, of course, apply. If a target company has employees, there is a general obligation to inform the employees of the transfer and its potential effects as soon as possible, and relevant collective employee agreements must always be considered.

In voluntary tender offers, the offer period must be no less than two weeks and no more than 10 weeks, and for a (subsequent) mandatory offer, the period must be at least four weeks and no more than six weeks (see question 2.1 above). Having said this, how long it will actually take, from the date on which a potential bidder starts preparing a takeover of a Norwegian listed target until such a target is delisted, may vary significantly on a case-by-case basis. In general, if a bidder starts out with a voluntary offer and receives acceptance of enough shares and voting rights in the target to immediately effectuate a subsequent squeeze-out of minority shareholders, the process will take (at least) four months. In cases where the offer puts the bidder in control of more than one-third, but not enough, of the shares and voting rights to effectuate a subsequent squeeze-out, the bidder will have to plan for an additional two to three months, because he must then issue a mandatory offer. Under such circumstances, the total timeframe from the start of the process until the bidder is able to delist the target will normally take at least six months. However, in the event that the bidder starts out with a mandatory offer that enables an immediate and subsequent squeeze-out of the minority shareholders, the bidder should most likely anticipate it to take around five months from the start to the target being finally delisted. In cases where the bidder decides to stop the takeover process after such a mandatory offer because he is unable to start a squeeze-out immediately thereafter, he will still have spent at least three months in total.

In statutory mergers where only private limited liability companies are involved, the merger plan with supporting documents (see question 2.1 above) shall be made available for the shareholders no later than two weeks prior to the general meeting in which the merger will be decided upon. If public limited liability companies are involved, the notice period is one month prior to the general meeting, and the merger plan must also be filed with the RBE a month before the meeting. If approved by the general meeting, the merger must thereafter be filed with the RBE for public announcement – this applies to private and public limited companies alike. Once published by the RBE, a six-week creditor notice period begins, upon expiry of which the merger can be effectuated.

2.4 What are the main hurdles?

The main challenge in any acquisition in a company with several shareholders, albeit more relevant to acquisitions of listed rather than privately held companies, is to acquire the 90% of shares and voting rights necessary to carry out a subsequent unilateral squeeze-out of any remaining minority shareholders. Furthermore, it is crucial to obtain competition clearance (and, if relevant, other regulatory clearance) as soon as possible, given the fact that shareholders may be reluctant to accept a voluntary offer that is still subject to regulatory clearance. Prior to issuing a tender offer for a company listed on a regulated market, the main hurdles are: obtaining due diligence access; negotiating financing terms with banks; establishing a good dialogue and negotiating the offer terms with target’s board; and (often) securing the support of larger shareholders. Getting the necessary finance arrangement in place may, in particular, represent a major hurdle for a bid dependent on significant leverage. For mergers, the “main hurdle” is to achieve the necessary approval by the general meeting in each of the participating companies (i.e. two-thirds of the shares and votes represented, unless the articles of association contain stricter voting requirements).

2.5 How much flexibility is there over deal terms and price?

In a voluntary offer to acquire a listed company, the bidder enjoys a great deal of flexibility with regards to terms and conditions (see subsection 2.1.2 above). Notwithstanding the absence of any statutory provisions to the contrary, an offer is not likely to succeed, however, it contains a premium on the share trading price (market price). Although there are examples of substantially higher offers, such premiums commonly range from 20% to 40% on the last 30 days’ average trading price. In a mandatory offer to acquire a listed company, the bidder has less flexibility. Besides the obligation to prepare a mandatory offer document to be approved by the OSE, the main statutory provisions restricting a bidder’s freedom of contract are the requirements of equal treatment of the target’s shareholders, and the provision that the offer price cannot be lower than what the bidder paid (or agreed to pay) for shares (or right to shares) in the target during the last six months. Please note that market price for the shares may be required if, when the obligation to make a mandatory offer was triggered, the price was higher than the now offered price. As set out in subsection 2.1.2.2, the OSE may decide that the offer price must be the market price of the shares if it finds that the market price at the offer date is higher than the bid price.

In a statutory merger, the flexibility in defining the terms and conditions is also restricted due to the fact that (i) the calculation of consideration payable to shareholders in the surrendering company, as well as other net asset valuations regarding the companies involved, must be approved by a certified and independent auditor, and (ii) a shareholder with more than one-third of the shares and votes in either of the merging companies may block the merger at the general meeting if he so chooses.

2.6 What differences are there between offering cash and other consideration?

The principal difference between offering cash and other consideration is the amount of information required to be published and the process for finalising the documentation. If the offer is settled in cash, it will be sufficient for the bidder to prepare a more or less standardised offer document (see subsection 2.1.2.1 et seq.). If transferable securities (typically shares) are offered as consideration, the bidder must also include in the offer document (or in a supporting document attached thereto) information equivalent to that of a prospectus – i.e. such qualified information including, inter alia, any special circumstances that can be attributed to the bidder or the nature of the securities being offered that is necessary for an investor to make a properly informed assessment of (a) the issuer’s and any guarantor’s financial position and prospects, and (b) the rights attaching to the securities in question. Such offer document (containing more or less the same information as a prospectus) must be reviewed by the Norwegian FSA (in addition to the OSE). The structure of share-for-share offers is therefore typically more complex, and due to the fact that the securities offered as consideration first will be admitted to trading (thereby fulfilling the criteria of liquidity) upon closing the offer, the admission process for the offered securities must be aligned so as to ensure that these securities are liquid at the point of closing the offer. Such an exchange offer may also require registration statements and other filings in foreign jurisdictions.

2.7 Do the same terms have to be offered to all shareholders?

During a stakebuilding or in a voluntary offer (that on a fully-accepted basis does not have the potential of acquiring more than one-third of the voting rights in the company), the bidder may, in general, offer whatever terms he likes to whomever he chooses.

However, if a voluntary offer upon full acceptance will give the bidder control over so many shares and voting rights that an obligation to issue a subsequent mandatory offer is triggered, or the mandatory bid obligation is triggered, then equal treatment will also apply for the voluntary offer and the bidder must afford all shareholders equal treatment when making a bid.

In a mandatory offer situation, all shareholders are, in principle, entitled to equal treatment, meaning that the bidder must present an unconditional offer with the same terms and conditions to everyone. The foregoing notwithstanding, there are certain exceptions to the principle of equal treatment (e.g. where certain benefits are conferred upon management shareholders through special agreements in connection with the acquisition). The requirement of equal treatment does not, however, mean that all shareholders must receive exactly the same offer in all instances. The exact assessment of how the bidder may be allowed to differentiate between shareholders must be decided on a case-by-case basis and will require tailored advice suited to the specific situation.

2.8 Are there obligations to purchase other classes of target securities?

A mandatory offer must encompass all outstanding shares in the target, regardless of what voting rights attach to each individual share (i.e. full, limited or none). There are no provisions that require bidders to purchase the target’s non-equity securities. In relation to new share issues not yet resolved, the OSE has previously ruled that the mandatory offer obligation is limited to shares (or rights to shares) that exist when the mandatory offer obligation arises or when the offer is made. To what extent a mandatory offer must also encompass “new” shares issued during the mandatory offer period (due to previously issued warrants, convertible bonds or other securities being redeemed) is somewhat unclear under Norwegian law. In a decision from 2011 concerning Teekay Corporation’s investment in Sevan Marine ASA, the OSE assumed that the mandatory offer obligation did not include shares issued in a stakeholder issue in connection with a restructuring of the issuing company. In its decision, the OSE did not stipulate to what extent such a mandatory offer obligation also encompasses new shares issued during the offer period due to redemption of such aforementioned and previously established rights. Until this question is clarified and/or resolved by the Norwegian FAS and the OSE (i.e. until statutory legislation to the contrary is formulated), it is assumed both under legal theory and general market practice that shares issued during the offer period due to redemption of warrants, etc., will and must be included in the offer.

2.9 Are there any limits on agreeing terms with employees?

The principle that all shareholders must be treated equally (see question 2.5) imposes some constraints on the terms that can be agreed with employees that hold or have options to acquire shares in the target. At the outset, a bidder may, without limitations, approach an employee of the target and agree upon whatever terms are desired, provided that such terms are not contrary to good business practice and conduct, or in violation of rules and regulations limiting the consideration a member of a company may accept in connection with its position in the company. As there are no statutory legal constraints on what can be agreed regarding severance terms for directors or senior executives in a target company, entitlements provided under such arrangements are likely to be permitted and upheld insofar as the arrangements do not give such employees unreasonable benefits at the expense of other shareholders in the company. The foregoing is naturally assuming that no limitations follow from the board’s declaration on the fixing of salaries or other remuneration schemes approved by the target’s general meeting. Note for completeness that Norwegian law restricts employees’ and directors’ right to accept remuneration from anyone outside the target company in connection with their performance of assignments on behalf of the target company.

Also note that a bidder must disclose in the offer document what contact it has had with management or governing bodies of the target before the offer was made, herewith including any special benefits offered to or agreed with any such individuals. When dealing with employees who are also shareholders in the target, a bidder should furthermore be aware that agreement upon terms and benefits which are not exclusively related to the employment of such a shareholder may, in accordance with the principle of equal treatment, be considered as part of the offered share price, thus exposing the bidder to the risk of having the offer price in the offer document adjusted to such a higher amount.

Upon completion of a successful acquisition, employees of the target are, going forward, protected against wrongful termination and mass layoffs under existing collective bargaining agreements and the Employment Act, which has implemented the Acquired Rights Directive (EC Directive 2001/23/EC). Following acquisition of either the whole or an independent part of a company, employment contracts are, pursuant to the Employment Act, transferred to the new owner, who will assume all rights and obligations as agreed between the acquired company and the transferred employees. In relation to this, the buyer is naturally not allowed to change the terms of employment contracts in order to provoke resignations from his new employees. Nonetheless, although the Employment Act protects against both direct and indirect wrongful termination due to an acquisition (i.e. transfer of ownership), terminations due to rationalisation may still take place, provided that the applicable laws are observed.

2.10 What role do employees, pension trustees and other stakeholders play?

Upon receiving an offer document in a public tender process, a target’s board of directors must prepare a public statement wherein the board’s reasoned evaluation of the offer is presented, including the effects the board anticipates that the bidder’s strategic plans (as detailed in the offer document) will have for the company, its location of business and its employees. Normally, employers in Norway do not engage pension trustees, but rather make use of standardised contribution pension schemes offered by larger saving banks and insurance companies. The accounts into which the employers’ contribute the monthly pension sum are linked directly to each individual employee, meaning that if the employee resigns, he or she may either transfer the balance to another pension scheme or continue the monthly contribution on his own. The board’s statement must be sent to the OSE and made available for the shareholders and employees no later than one week before the offer expires. The target’s employees are entitled to prepare their own statement with regards to the offer’s effect on employment in the target, which, if given to the board within reasonable time from when the offer was submitted, shall be attached to the board’s statement.

In a statutory merger, the board of all companies involved must also prepare a particular statement wherein the merger and its anticipated effects for employees are described. Employee representatives also have a statutory right to receive all relevant information and discuss the merger with the board.

Where the bidder is a Norwegian entity that is bound by a collective bargaining agreement with trade union(s), the bidder may also be required to consult with the relevant union(s) before making an offer, where the intended acquisition would entail “a legal reorganisation” to the bidder’s existing business. Furthermore, employees and their representative bodies may attempt to influence the outcome of an offer by publicly expressing their support and/or rejection of the offer. Such statements will typically receive attention from the tabloid media and the general public, but are rarely able to disrupt or frustrate an offer process otherwise supported by the bidder and the target.

Other stakeholders with interests in a company involved in an M&A process will normally only have such rights or obligations as follow from whatever arrangement he or she has with the company. More important contractual relationships, like bank financing/facilities agreements or real estate contracts/leases, often contain “change of control” clauses which the parties must consider in light of the transaction. Transactional parties should therefore obtain required prior consents from such parties.

2.11 What documentation is needed?

The key documents necessarily involved in a public takeover bid are: (i) notification of the bidder’s decision to make an offer; (ii) publication of this notification by the OSE; (iii) an offer document (or a prospectus or equivalent document if applicable – see question 2.6) containing information about the bidder, type and terms of the offer and acceptance mechanics, etc.; (iv) an acceptance form; (v) the target board’s response statement; and (vi) the bidder’s announcement of the result of the offer. Other relevant documents include: a confidentiality agreement between the parties; a transaction/due diligence agreement between the bidder and target; a fairness opinion; documentation relating to the financing; Irrevocables (pre-acceptance undertakings) from the shareholders; an information brochure to make the offer document/prospectus more readily accessible; and documentation relating to a general meeting of shareholders. Additional press announcements and supplements to the offer document/prospectus may be required, if the bidder, for instance, wants to increase the offer consideration.

For statutory mergers, the main documentation required consists of: a joint merger plan; written reports prepared by the board in each company regarding the merger; and an independent expert statement detailing the valuation procedure applied when calculating the consideration payable to the shareholders in the surrendering company. The foregoing must, together with other pertinent information, be sent to the shareholders in each company and registered with the RBE at least one month before the merger is presented for approval by the general meeting in each company. Once approved, the merger must be registered with the RBE, at which time a creditor notice period of six weeks will begin. Upon expiry of the said notice period, the merger must be registered as completed in the RBE, and the surrendering company is automatically dissolved. Statutory mergers involving one or more publicly listed companies must also, in general, be notified to the OSE, and the merger plan (or a supporting document attached thereto) must include such information equivalent to that of a prospectus – see question 2.6 for more detail on such required information.

2.12 Are there any special disclosure requirements?

The STA sets out the requirements for disclosure to be made in an offer document for a listed target, which, inter alia, include a requirement to disclose: (i) information about shares in the target controlled by the bidder’s related parties; (ii) the method used in establishing the bid price; (iii) the principles underlying the valuation of assets offered as consideration; (iv) how the purchase of the shares is to be financed; (v) special advantages that are afforded (by agreement) to members of management or governing bodies of target; (vi) what contact the bidder has had with management or governing bodies of target before the bid was made; and (vii) the purpose of the acquisition and plans for further operation of target, etc. Financial information in summary form is also typically included. If securities are offered as consideration, an offer document containing much of the equivalent information as a prospectus with extensive disclosures is required. A bidder that reaches the mandatory offer threshold will also have to disclose this, as well as when the mandatory offer will be made.

In addition to what is set out above (and what follows in question 5.3 below regarding disclosure requirements in relation to significant shareholdings), merger talks or acquisition discussions involving a publicly traded company will at some point constitute inside information between the parties (i.e. information that is likely to affect the price of a specific financial instrument and that is not publicly known), and must accordingly be disclosed to the market by the prospective target – see question 4.2 below.

2.13 What are the key costs?

The key transactional costs are typically related to advisers (legal, financial, etc.). Although no stamp duties or similar governmental fees are levied upon share transfers, one should make allowance for certain minor costs to the OSE and the Norwegian FSA for document control, as well as other miscellaneous costs in connection with preparation and distribution of offer documentation.

2.14 What consents are needed?

In acquisitions of publicly listed companies, the OSE (and the Norwegian FSA, in cases where a prospectus (or an equivalent document) is required) must approve the offer and the offer document before it can be launched, and in mergers, the merger plan must be approved by the general meeting in all participating companies. In both instances (including acquisitions of privately held companies), it will be necessary to file and obtain approval from the NCA if combined group turnover of the acquirer and the target in Norway is NOK 1 billion or more, and at least two of the undertakings concerned each have an annual turnover in Norway exceeding NOK 100 million. A merger filing may be required under the NCA (or alternatively under the EU Merger Control) if both parties have some sales to Norwegian customers, even though none of them are actually established in Norway. Certain sector-related approvals may also be required – see question 1.4 above. As under the EU merger rules, an exemption rule, modelled on Article 7(2) of Regulation (EC) 139/2004 on the control of concentrations between undertakings, has been implemented. This exemption rule allows a public bid or a series of transactions in securities admitted to trading on a regulated market (such as the OSE) irrespective of the standstill obligation. However, the bidder cannot at any time “exercise any form of control” over the target until the end of the standstill period following the filing. Nevertheless, a bidder can use the voting rights to such shares to protect its investment without being in violation of the prohibition against exercising any form of control. The bidder cannot, during the standstill period, start integrating and coordinating the target’s future operations with the bidder’s own operations.

2.15 What levels of approval or acceptance are needed?

As a starting point in all acquisitions, the articles of association (as well as any applicable shareholders’ agreements) in both the acquiring and targeted company should be examined as these may contain provisions that give shareholders approval/refusal rights as regards proposed acquisitions/disposals of assets or shares. Once a tender offer has been put forward, there is no minimum approval/acceptance threshold required (i.e. the bidder will basically “get what he gets”), but the bidder will normally (in a voluntary tender offer) make the offer conditional on achieving a minimum level of acceptance, all depending on what control the bidder is trying to obtain. To control the board of directors, the bidder needs more than 50% of the votes; to amend the articles of association, he needs at least two-thirds of the votes and share capital; and to carry out a minority squeeze-out, he needs 90% or more of the votes and share capital. It is therefore common practice to make voluntary offers conditional upon a 90% acceptance level. Mergers, demergers, and issuance of new shares or other subscription rights will generally require approval by two-thirds of the votes and share capital represented at the general meeting.

2.16 When does cash consideration need to be committed and available?

In a mandatory offer process, settlement in full must be unconditionally guaranteed by a financial institution (authorised to issue such guarantees in Norway) before the offer is put forward, and the offer document must explain the guarantee mechanisms that are put in place to cover the bidder’s obligations under the transaction. Once the acquisition is completed, settlement shall take place as soon as possible but no later than 14 days after the offer period ends. In a voluntary offer process, the offer document must include information on how the acquisition is to be financed, but there is no requirement that the offer is financed or guaranteed, and the settlement procedure may, to some extent, be decided by the bidder. In practice, however, the required settlement mechanisms for a mandatory offer will normally also be adhered to by bidders in voluntary offers.

3. Friendly or Hostile

3.1 Is there a choice?

Technically, Norwegian law does not distinguish between friendly and hostile takeovers, and both friendly and hostile offers are accepted. There are, nonetheless, certain provisions in the STA to which a bidder should dedicate extra review and attention whenever a “hostile” transaction is contemplated, hereunder in particular the restrictions on a target’s freedom to make certain corporate decisions once the board has been notified that an offer is imminent (see question 8.2 below). Even though most offers are recommended by the target board, hostile offers do occur in Norway.

3.2 Are there rules about an approach to the target?

There are no statutory rules regarding a bidder’s approach to a listed target, and a bidder may freely approach either the board or the majority shareholder of the target as the bidder sees fit. The standard approach is that the bidder contacts the chairman of the target’s board of directors, in order to discuss the potential transaction prior to initiating any type of offer process. The bidder will, during such contact, attempt to convince the target’s board to recommend a potential offer and, if possible, try to obtain Irrevocables from any board member being shareholders. If the board is hostile, the bidder may instead try to liaise directly with one or two majority shareholders whose shareholdings in the target makes them necessary and key counterparties for a successful takeover.

In a hostile transaction where the board and/or certain influential shareholders will seek to frustrate/prevent potential takeovers, the key to success lies in securing “effective control” of the target. In this context, effective control means at least two-thirds of the voting rights at the general meeting, which is the majority requirement for the changing of a company’s articles of association (see question 2.15 above). Once effective control is secured, the bidder may, albeit as a secondary objective, try to obtain 90% or more of the votes in order to carry out a minority squeeze-out.

3.3 How relevant is the target board?

The target’s board has a key role and shall act in the best interests of the company and its shareholders. How the board perceives the offer and the offer price is thus very important. As mentioned in question 3.2, a bidder’s first step, after its internal preparations and prior to the announcement of a voluntary tender offer process, is very often to approach the target’s board for a preliminary discussion/assessment of the planned transaction, which includes initial price indications and negotiating access to due diligence information. In mandatory offers, the board may also influence how the offer eventually is received by the market, as the board must issue a statement and recommendation to the shareholders regarding the offer. Although not very common, the board may also have received special authorisations by the general meeting in which it is authorised to take certain defensive measures in takeover situations (see question 8.2).

Statutory mergers cannot be carried out without the board’s consent as it is the board’s responsibility to prepare the merger and present it for the shareholders’ approval at the general meeting (see subsection 2.1.3 regarding merger preparations).

3.4 Does the choice affect process?

The choice of strategy is not as much a choice as it is a consequence of whether the board and/or certain influential shareholders will be receptive to the offer or not. If they view the offer as hostile, the bidder will normally not be given the opportunity to conduct a satisfactory due diligence and is therefore better served by not revealing his intentions but may instead initiate a stakebuilding process before launching an ensuing all-encompassing offer. Making a hostile offer may require more strategic planning than making a recommended offer, in particular with regard to how the bidder will justify the offer price. In a hostile transaction, the target’s board may also attempt to initiate certain defensive measures against the bidder (see section 8 below).

4. Information

4.1 What information is available to a buyer?

When making a first assessment as to whether a target is worth pursuing, a bidder usually only has publicly available information to go on. This includes information memoranda/prospectuses, announcements and financial statements published by the target. Certain additional corporate information can also be retrieved from the RBE. In a friendly takeover, a bidder may receive further information from the target’s board of directors in connection with a pre-bid due diligence, but a target’s board will normally be restrictive in sharing company information – at least until a public offer has been made (which, for voluntary offers, may be conditioned upon a satisfactory due diligence). The target’s board is considered to have a general obligation to treat bidders fairly, but all depending on the circumstances; it may give certain bidders access to information it does not give to others (e.g. by sharing certain information with financial investors but not industrial and often competing investors).

4.2 Is negotiation confidential and is access restricted?

The board of a listed target company is required to disclose any information on new facts or occurrences of a precise nature that is likely to have a notable effect on the price of the target’s shares or of related financial instruments and which thereby constitute inside information. It is up to the target board’s discretion to engage in discussions with a potential bidder and to divulge information; see question 4.1 above.

Confidential negotiations with the target’s board at an initial stage are, with certain constraints, possible prior to the announcement of the bidder’s intention to launch a bid, provided that the parties are able to maintain confidentiality. However, the fact that a listed company is discussing a takeover or a merger, and the content of such negotiations, will at some point constitute inside information that must be disclosed to the market. The OSE’s Appeals Committee has previously ruled that confidential negotiations between a potential bidder and a target’s board could trigger disclosure requirements even before it is highly probable that a takeover offer will be launched, insofar as such conversations “must be assumed not to have an immaterial impact on the target’s share price”. A bidder and the target’s board must therefore be prepared for situations where the OSE takes the position that the disclosure requirement is triggered at a very early stage – possibly already from when the target enters into non-disclosure agreements allowing potential bidders due diligence access. If a target is approached regarding the potential intentions of launching a bid, this will not, however, in itself, trigger any disclosure requirements for target.

So as not to prejudice or harm legitimate business interests during a negotiation and planning phase, a target may decide to delay disclosure; provided, however, that: postponement does not mislead the public; the inside information is kept in strict confidence between the parties; and the OSE is informed about the target’s decision to delay disclosure. The obligation set forth in the STA to inform the OSE of the target’s decision to delay disclosure has been amended, so that the issuer only has to notify the OSE about such delay after the relevant information has been disclosed, cf. question 10.1 below. This amendment will take place from the time when the amendments of the law, which have now been adopted by the Parliament implementing the Market Abuse Regulation into Norwegian law, takes effect. The target is furthermore required to keep a list of all persons in possession of the information (with date and time entries), of which a copy must be furnished to the OSE upon request. Any leakage of the unpublished inside information may imply that the conditions for the postponement of the disclosure are no longer fulfilled and the inside information in question should be disclosed to the market. If the target has been approached for negotiations and there is leakage that results in share price movements and/or rumours and speculations, the target may be obligated to publish the intention of the bidder.

It is possible for a bidder to selectively provide information about a contemplated offer to key shareholders in order to obtain acceptance undertakings or Irrevocables before launching an offer, but only to the extent necessary and always on a strictly confidential basis.

4.3 When is an announcement required and what will become public?

Once someone has decided to make a voluntary takeover bid, the OSE and the target company shall be notified immediately, and the OSE shall, as soon as possible thereafter, make the notification available to the public. The offer document must contain a description of what contact the bidder has had with the management or governing bodies of the target before the bid was launched, as well as a description of any special benefits conferred or agreed to be conferred upon any such individuals by the bidder. Such information comes in addition to what the target is required to disclose on its own initiative – see question 4.2 above. In practice, the target may issue a “wash clean” announcement prior to the offer document being launched, disclosing any inside information provided to the bidder in the context of a due diligence.

4.4 What if the information is wrong or changes?

Once the acquisition of a publicly listed company is complete, the buyer will have very limited recourses if it turns out that the premises or information it relied upon in the offer process was wrong, or has changed to its disfavour along the way. As opposed to what is normally the case in private acquisitions, the numerous sellers in a public acquisition will not give any representations or warranties. Representations and warranties may be agreed with major shareholders, but in practice this rarely happens in a public transaction. The target may also issue certain representations and warranties in some form of transactional agreement with the bidder, but such warranties will, depending on the bid acceptance grade, be of little value to the bidder after the acquisition. A claim based on faulty information against the target’s board or the bidder’s own advisers is (save gross negligence) not likely to prevail due to the nature of public acquisitions (i.e. the inherent balance between the flow of information and the need to safeguard the interests of all shareholders). For deal protection up until the transaction is complete, see section 6.

5. Stakebuilding

5.1 Can shares be bought outside the offer process?

A bidder can build a stake in target through off- or on-market share purchases outside the offer process. Such purchases may have an effect on the terms that must be offered (see questions 2.5 and 2.7), and disclosures may be required (see question 5.3). Purchase of shares outside the offer may be prohibited to the extent the bidder is in possession of inside information. The insider trading provisions do not, however, prevent the bidder from acquiring shares in the target where the inside information only relates to the bidder’s intention of making an offer.

5.2 Can derivatives be bought outside the offer process?

In addition to building stakes in a target through direct shareholdings, it has become fairly common for bidders to use different types of derivative techniques (common types include futures, options, equity swaps or contracts for difference) in a manner that has the potential to affect the market of the underlying securities, e.g. by reducing the “free float” of the target. These are synthetic contractual instruments enabling a party to gain economic exposure to price movements in a given security, without the need for that party to actually hold the underlying security. Equity derivatives may, in principle, be used as a method of warehousing an undisclosed position in a listed company, given that the underlying physical securities held as a hedge will, in all likelihood, be available for purchase at the counterparty’s option. There are, in principle, no limits on the time period during which a stake in target’s shares can be built through derivatives. A bidder should, however, observe insider trading rules, and also the fact that certain derivatives in the form of convertible securities (typically share options) will be counted when calculating disclosure thresholds (see question 5.3). Some derivative instruments could also, in certain circumstances, be deemed part of a bidder’s total holding for the purposes of the thresholds which trigger a mandatory offer obligation. It is proposed to amend Norwegian law so that derivatives with shares as underlying instruments, irrespective of such derivatives being cash-settled or settled by physical delivery of the underlying instruments, will also be counted when calculating these disclosure thresholds (see question 10.1 below). In this regard, it is also being proposed to abolish the current disclosure requirements that apply under Norwegian law for warrants and convertible bonds not linked to any issued (existing) shares (see question 10.1 below).

5.3 What are the disclosure triggers for shares and derivatives stakebuilding before the offer and during the offer period?

Once a shareholder’s proportion of shares, rights to shares, or corresponding proportion of votes (if different) in a listed company reaches, exceeds or falls below the thresholds of 5%, 10%, 15%, 20%, 25%, one-third, 50%, two-thirds or 90% as a result of acquisition, disposal or other circumstance, the shareholder must immediately notify the company and the market place (i.e. the OSE). A failure to disclose will frequently result in a fine, and such fines have grown increasingly large over the years.

Investors should observe that certain types of convertible securities (e.g. subscription rights and options), as well as Irrevocables obtained during a stakebuilding process (see subsection 2.1.1) are counted when calculating whether a threshold has been reached. For the purpose of disclosure obligations, the borrowing of shares will be also treated as an acquisition, and lending may, depending on the circumstances, be treated as a sale. To comply with its obligations under the EEA agreement, Norway is currently in the process of implementing certain amendments to the disclosure regime for derivatives (see question 10.1 below). If adopted in its current proposed form, both borrowing and lending of shares will become subject to the same notification regime. The foregoing notwithstanding, please note that, regarding the disclosure of Irrevocables, it is assumed in Norwegian legal theory that properly drafted “soft” Irrevocables will not trigger the disclosure requirements. It has, in Norwegian legal theory, also been assumed that long equity derivatives positions which are purely cash-settled (typically futures) will not be subject to any form of disclosure obligations. This being said, the Norwegian Court of Appeals’ ruling in Seadrill v. OSE from 2009 has clarified that total return swap (“TRS”) arrangements under certain circumstances will also count for the purposes of mandatory offer thresholds. In this regard, also note that a government-appointed committee has now proposed to amend the Norwegian legislation so that the materiality thresholds and filing requirement in the future shall apply for derivatives with shares as underlying instruments, irrespective of whether they are cash-settled or settled by delivery of underlying securities (see question 10.1 below).

Notification must be given as soon as an agreement of acquisition or disposal has been entered into. It is important to be aware that disclosure is also required when one of the foregoing thresholds is crossed through “passive” acquisition/disposal (e.g. if a company carries out a share capital change but a shareholder does not actively acquire/dispose of any shares or rights to shares). In such cases, notification must be given as soon as the shareholder becomes aware of the circumstances causing his shareholdings to reach, exceed or fall below the relevant threshold. Consolidation rules apply for shares held by certain affiliates and closely related parties. Hence, the combined holdings of both the acquirer or disposer and such a party’s close associates are relevant when deciding if any disclosure obligations have been triggered.

Be advised that private equity, hedge or venture funds, acquiring control (more than 50% of the votes) over a listed target company must also observe certain specific disclosure requirements set out in the Norwegian Alternative Investment Fund Managers Act. This act implements the AIFM Directive into Norwegian law, and imposes an obligation on such funds’ managers to, inter alia, notify the Norwegian FSA in the event that such fund acquires control over a target whose shares are admitted to trading on a stock exchange or another regulated market.

5.4 What are the limitations and consequences?

A duty to make a mandatory offer is triggered by the transfer of shares whereby the acquirer obtains control of one-third of the votes in a listed company – see subsection 2.1.2.2 above. Share acquisitions before or during the course of an offer could potentially have an effect on the offer consideration (see questions 2.5, 2.6 and 2.7 above) and on the consideration to be paid in a squeeze-out procedure (see question 7.4 below). Confidentiality agreements between the bidder and target will often also include a “standstill” clause preventing the bidder from acquiring shares in the target without the target’s consent for a specified period. Also note that arrangements aiming at taking control of the target without acquiring shares (for example, by the use of derivatives resulting in a financial exposure at or above the mandatory bid threshold) may be considered in contradiction of good market practice, and may also trigger a mandatory offer obligation. A ruling by the Norwegian Court of Appeals in Seadrill v. OSE (2009) affirmed that entering into a TRS arrangement under certain circumstances may lead to consolidation between the parties under such a TRS arrangement, in particular if such an arrangement is used to gain control in connection with a takeover situation. The court concluded that the arrangement in that particular case triggered a duty to issue a mandatory offer for the shares in the listed target company.

6. Deal Protection

6.1 Are break fees available?

Break fees are available in the sense that Norwegian takeover legislation does not contain particular provisions prohibiting them. Due to strict rules about corporate governance and fiduciary responsibilities, however, the use of break fees is less common in Norwegian M&A transactions compared with other jurisdictions (especially with respect to public acquisitions). Whether or not a break fee arrangement will be enforceable in a public acquisition will normally depend on whether the arrangement was entered into in the best interests of the company and its shareholders (much equivalent to the US business judgment rule). This assessment is difficult to make, but on a general note, one could probably say that if (a) the agreement was made in the best interests of the company and its shareholders (e.g. if the company has or stands to receive a highly favourable offer conditioned upon a satisfactory due diligence process), and (b) the potential break fees will mainly cover extrinsic transactional costs (typically legal fees), then the arrangement will most likely be acceptable and enforceable. It should, however, be noted that break fee agreements limiting the ability of a target’s board to fulfil its fiduciary duties, or which may put the target in financial distress if the break fees become effective, are likely to be deemed unenforceable and may, in consequence, result in personal liability for the board members. Potential financial assistance aspects of a break fee arrangement should also be considered carefully.

It is of further note that the Norwegian Code of Practice for Corporate Governance (“Code of Practice”), which applies to all companies listed on the OSE on a “comply or explain” basis, states that a target’s board must exercise great caution in agreeing to any commitment which makes it more difficult for competing bids to be made from third-party bidders or which may hinder any such bids. Such commitments, including commitments in respect of exclusivity (no-shop) and in respect of financial compensation if the bid does not proceed (break fees), should be clearly and evidently based on the shared interests of the target company and its shareholders. According to the recommendations, any agreement for break fees payable to the bidder should, in principle, be limited to compensation for costs incurred by the bidder in making the bid.

6.2 Can the target agree not to shop the company or its assets?

No-shop and similar agreements between the bidder and target under which the target’s board is prevented from actively shopping the company or its assets around to different potential bidders is possible. Such arrangements are normally considered commercial business decisions that the board may make at its discretion (cf. the US business judgment rule); provided, however, that all decisions must be made in the best interests of the company and its shareholders (see question 6.1 above). The Code of Practice recommends that the target should only enter into such no-shop arrangements if it is self-evident that the agreement is in the common interests of the target and its shareholders. If the target is approached by another potential bidder, the board must nevertheless evaluate the competing offer and will be under an obligation to support the offer if it seems in the best interests of shareholders, employees, creditors and the public to do so.

6.3 Can the target agree to issue shares or sell assets?

After the target has been informed that an offer (voluntary or mandatory) will be made and until expiry of the offer period, the target will, subject to certain exceptions discussed in question 8.2, be prohibited from: issuing shares or other financial instruments in the company or any of its subsidiaries; merging the company or any of its subsidiaries; selling or purchasing assets of material significance in the company or any of its subsidiaries; and selling or purchasing shares in the company. These restrictions do not apply to disposals that are part of the target’s normal business operations or where a shareholders’ meeting authorises the board or the CEO to take such actions.

6.4 What commitments are available to tie up a deal?

Apart from break fees that within certain limits are accepted (see question 6.1 above), a bidder will often make use of Irrevocables to tie up a deal (see subsection 2.1.1 above). During a pre-bid negotiation phase, a bidder may also to some extent enter into an understanding with the board of directors, wherein the board approves and undertakes to recommend the offer to the target’s shareholders. As regards the board’s recommendation, it should be noted that the Code of Practice recommends (for all offers received) that the board obtains a valuation report from an independent expert, against which the offer in question may be benchmarked/assessed.

7. Bidder Protection

7.1 What deal conditions are permitted and is their invocation restricted?

Voluntary offers

Voluntary offers can be made on a conditional basis, and there are, in general, no statutory limitations as to what conditions a voluntary offer may contain (see subsection 2.1.2.1 above) or how such conditions may be invoked/introduced (apart from undue pressure or downright illegal actions, of course).

Mandatory offers

Mandatory offers, on the other hand, may neither be conditional (not even for such conditions as statutory consent requirements), nor provide for a right of withdrawal.

Mergers

Mergers may set conditions for completion up until it has been registered and implemented in the RBE as completed. Such conditions will be stipulated in the agreed-upon merger plan between the parties involved.

7.2 What control does the bidder have over the target during the process?

During a public tender offer process, the bidder may only influence the target if and to the extent that it has reached a voluntary and binding transaction agreement with the target’s board. In such agreements, the target may agree that up until settlement of the offer, it will abide by certain customary covenants, such as: conducting its business in the ordinary course; not altering its share capital in any manner; and not taking or omitting to take any action that may have the ability to frustrate the launch and completion of an offer, etc.

As opposed to what normally is the case in private transactions, it has not been common practice that the sellers and/or the target in a public tender process will give any representations or warranties. Traditionally, due diligence has (in general) therefore been the bidder’s only means of identifying potential problems before the offer is made. A bidder may, however, make a voluntary offer subject to conditions relating to incorrect information or material adverse changes, and in cases where the bidder enters into a transaction agreement with the target’s board prior to issuing the offer, it has now become more common for such transaction agreements also to include certain customary and limited representation and warranties by target. The bidder’s influence over the target in a public tender process is nonetheless subject to far-reaching restrictions under the law (see, inter alia, section 6 above), and the influence a bidder can legally exercise over the target during the offer period is accordingly quite strict. The STA and the Code of Practice also severely limit the ability of a target’s board to make controversial decisions in the interim period without the risk of being liable for damages. In a statutory merger, the parties usually agree that the surviving company, upon a defined “effective date”, shall take full control over the surrendering company, with all the rights and obligations included.

7.3 When does control pass to the bidder?

The title to shares acquired through an offer process passes to the bidder at settlement. Thereafter, and assuming that the bidder is entitled to at least 10% of the target’s shares, the bidder is entitled to request an extraordinary shareholders’ meeting to be convened in order to elect new board members. A shareholding of more than 50% of the voting rights (simple majority) gives the bidder legal control over many important decisions adopted at the general meeting of target – in particular, the election of shareholders’ representatives to the board of directors, or in cases where the target has a corporate assembly, two-thirds of the members with deputy members of such a corporate assembly, which has the power to elect the target’s board. In a target with a particularly large and diversified shareholder structure, the bidder may, in reality, gain actual control at an earlier stage, in the sense that he has enough shares to cast the often deciding vote at the shareholders’ meetings. A shareholding of at least two-thirds of the voting rights and the share capital represented at a target’s shareholders’ meeting gives the bidder effective control by enabling him to change the articles of association and/or decide to merge the target with another company. Effective control is of key importance in a hostile takeover; see question 3.2. A shareholding of at least 90% of the share capital and votes gives the bidder the possibility to squeeze out the remaining minority shareholders.

As long as the target still has minority shareholders, a bidder must always acknowledge that the target is a separate legal entity and be able to justify transactions involving the target from a corporate benefit perspective. The general principle of equal rights for all shares must naturally be adhered to, which includes restriction on conferring undue advantages to a shareholder (or a third party) at the expense or to the disadvantage of the target or any other shareholder.

In statutory mergers, control passes to the surviving company (by operation of law) once the merger is registered as complete in the RBE (see question 2.3), unless the parties have agreed otherwise in the merger plan (e.g. that control shall pass once the joint merger plan has been approved by the general meeting in both companies).

7.4 How can the bidder get 100% control?

If the bidder has acquired 90% of the share capital and the votes of the target, it can initiate a squeeze-out of the minority shareholders. Minority shareholders may not block the squeeze-out but can request a review of the compensation offered. If the squeeze-out takes place within three months following the end of the offer period in a public tender process, the compensation, in the squeeze-out, has the “presumption of adequacy” if it equals the bid price in the preceding offer process. Provided that the bidder has acquired at least two-thirds of the share capital and the votes of the target, it can also initiate a statutory merger between the bidder and target in which the shareholders of the target are issued shares in the bidder as consideration. Alternatively, the bidder may initiate a statutory merger between the target and one of the bidder’s subsidiaries or group companies. If the bidder, following such a merger, controls at least 90% of the share capital and votes in the merged entities, it can initiate a squeeze-out of the remaining minority shareholders.

8. Target Defences

8.1 What can the target do to resist change of control?

Unsolicited offers are rare in the Norwegian market, and situations where a target’s board seeks to frustrate a takeover process through defensive measures have rarely been tested by the courts. Such actions, solely taken for the purpose of frustrating a potential offer, may also constitute breach of the directors’ duties to act in the best interests of all shareholders and the target as a whole, and we reiterate the general prohibition against board actions that benefit certain shareholders at the expense of the others (see question 2.7 above).

Pre-bid defences

Before the target is informed that an offer will be made or before the offer is issued, there are few restrictions on the use of defensive measures, provided that the board’s general fiduciary duties towards the company and its shareholders are observed. A prospective target may, e.g., introduce certain defensive devices by amending its articles of association to include special voting rules, lower mandatory bid levels and setting out special criteria that shareholders must fulfil in order to own shares in the company. Please note, however, that the OSE will not allow resolutions the result of which is that the listing conditions are no longer met. A target may also be protected from hostile takeovers through change of control provisions in its commercial contracts. More advanced US-style shareholders’ rights plans or poison pills are currently not common in the Norwegian market.

Post-bid defences

After a public offer has been issued for the acquisition of a listed target, or after such a target has been informed that an offer will be made, the target’s board or manager is restricted from making decisions with regards to: (i) issuance of shares or other financial instruments; (ii) merger of the target or subsidiary; (iii) sale or purchase of significant areas or operations, or dispositions of material significance to the nature and scope of the target’s operations; or (iv) purchase or sale of the target’s own shares. These restrictions do not apply, however, to disposals that are part of the target’s normal business operations or where the general meeting has authorised the board or the manager to take such actions with takeover situations in mind. As a result of this, a fairly large number of Norwegian listed companies have started to adopt defensive measures aimed at preventing a successful hostile bid. Even if such specific authorisations have not been adopted by the shareholders’ meeting, the target’s board will generally be permitted to: argue against accepting the offer; resist due diligence access; make dividend payments; seek a white knight or white squire; explore other alternatives; and communicate the true potential of the target, including announcing financial information and forecasts not previously disclosed and/or using a Pac-Man defence. In the case of an exchange offer, the target’s board may also question the value of the consideration payable, focusing on the bidder’s financial position or operational performance.

8.2 Is it a fair fight?

There are no specific rules in the STA designed to create a level playing field between a preferred bidder and a hostile bidder. Differentiation in the treatment of bidders is permitted within certain limits, including with respect to information access during due diligence. With reference to the Code of Practice, a competing bidder may argue that, in order to follow the fundamental principle of equal treatment (of all shareholders in the target), the offer process should, for the benefit of bidders and shareholders alike, be as transparent and open as possible, and that the competing bidder accordingly must be granted similar access to what has been afforded the original bidder. In practice, however, this argument does not hold sway as each bidder throughout the offer period may improve or modify its offer at will, thus giving the various parties involved more or less equal footing as to the progress of the process. Also note that if a bid is issued by someone who is a member of target’s board, or the bid is made in concert with the target’s board, the OSE will require that the target board’s response statement is issued by an independent third-party financial adviser on behalf of the target. Historically, few accusations of unfair play have surfaced, and most Norwegian companies and boards can, in general, be expected to make rational decisions for the benefit of their shareholders.

9. Other Useful Facts

9.1 What are the major influences on the success of an acquisition?

Setting aside the obvious elements of stakebuilding, irrevocable undertakings, finding the right offer price including premiums, careful appraisal of antitrust issues, and finally presenting a carefully reasoned case to the authorities (all of which inherently underpin any transaction), the main element that time and again has influenced the successfulness of an acquisition and the offer process, has been the diligent review and assessment of the commercial aspects driving the deal, herewith including post-deal integration challenges such as cultural aspects and support from the target’s management and employees. Many legal advisers underestimate the importance of discussing these aspects in depth with the client, inadvertently depriving themselves (and sometimes the client) from seeing the whole “deal-picture” that is necessary to tailor a transaction and an offer towards the specific needs of all parties involved.

9.2 What happens if it fails?

Apart from lost time, sunk costs and potentially bad press, there are no particular consequences of an unsuccessful transaction.

10. Updates

10.1 Please provide a summary of any relevant new law or practices in M&A in your jurisdiction.

EU initiatives – General

Over the last few years, the EU has issued several new directives, regulations and/or clarification statements regarding the capital markets. These initiatives from the EU will most likely, directly or indirectly, have an impact on the regulatory framework for public M&A transactions in Norway in the years to come. However, due to constitutional challenges with regard to transferring national authorities to a supranational financial supervisory system in the EU, several of these revised EU rules have been severely delayed in their implementation into Norwegian law. Now these constitutional challenges are resolved, and as a result several amendments to the STA are in force or are expected to take place during the next year.

Expected amendments to the STA

In 2015, the government appointed an expert committee to evaluate and propose relevant amendments to existing Norwegian legislation resulting from the EU amending the Market Abuse, the MiFID I, and the Transparency Directives (the “Committee”). The Committee has delivered five reports to the Ministry of Finance.

In its first report, provided in February 2016, the Committee proposed implementation of certain amendments to the STA, with regard to, inter alia, disclosure requirements for derivatives with shares as underlying instruments. According to the proposal, the materiality thresholds and disclosure requirements that apply for acquisition of shares in listed companies shall now also apply for derivatives with shares as an underlying instrument, irrespective of such equity derivatives being cash-settled or settled by physical delivery of the underlying securities. The Committee further proposes that both borrowing and lending of shares shall become subject to the same notification regime for both the lender and the borrower. Soft irrevocable undertakings will remain exempt from the disclosure obligations.

The existing disclosure obligations under the STA also include an obligation to disclose information in relation to “rights to shares”, regardless of whether such shares have already been issued or not. This is a stricter disclosure and filing obligation than what follows from the minimum requirements set out in the Transparency Directive, and the Committee has proposed that the obligation be abolished. If adopted by the Parliament, Norwegian law will no longer have mandatory disclosure obligations for warrants and convertible bonds not linked to any issued (existing) shares.

The second report, published in January 2017, deals with the implementation of MiFID II and MiFIR rules in Norwegian law. In April 2018, the Ministry of Finance issued a white paper to the Parliament based on the Committee’s second report and in June 2018, the Parliament resolved to implement these proposals into Norwegian law. However, these changes do not contain amendments that are directly relevant for the bidder or target in M&A processes.

The third report, provided in June 2017, deals with the implementation of the Market Abuse Regulation and sanctions and includes proposals by which the STA rules governing market abuse are expanded. This includes more detailed regulations concerning inside information, by a proposal for new rules concerning so-called “market sounding” that occurs in preparation for a potential transaction, amongst others. It is also proposed that primary insiders will be personally obligated to publish information about their trading activities in listed financial instruments. On 12 June 2019, the Parliament adopted a bill implementing the Market Abuse Regulation into Norwegian law by amending chapter 3 of the STA. These amendments came into force in Norwegian law from 1 January 2020.

The fourth report, provided in January 2018, concerns the implementation of supplementary regulations regarding MiFID II and MiFIR.

The fifth report, provided in June 2018, concerns the implementation of the amendments to the Prospectus Regulation and rules regarding national prospectus requirements. On 12 June 2019, the Parliament adopted a bill implementing the Prospectus Regulation into Norwegian law by amending chapter 7 of the STA. cf. below.

Takeover rules

In addition to the reports above, on 23 January 2019, the Committee also submitted a sixth report concerning the Norwegian rules governing voluntary and mandatory offers, with particular focus on the STA current limited regulation of the pre-offer phase. This Committee report did not arise out of changes to EU rules but rather the need to review and update Norwegian takeover rules on the basis of past experience and market developments.

The Committee proposes, inter alia, a new requirement that a bidder must carry out certain preparations before it announces that it will launch an offer to acquire a listed company. It also proposed new content requirements for the notification that a voluntary offer will be made, including information on matters of importance for the market’s assessment of the offer and for the formation of the price. The proposal clarifies that the Norwegian Takeover Supervisory Authority (now Oslo Stock Exchange) shall publish such notification immediately. The bidder must, in this regard, present a voluntary offer no later than four weeks from the publication of the notice announcing that an offer would be issued. At the same time, it is proposed that the Takeover Supervisory Authority may grant an exemption from this deadline in special cases. The minimum length of the offer period in voluntary offers is proposed to be extended from at least two to at least four weeks.

The existing main rule that the offer price under a mandatory offer must correspond to the highest consideration paid or agreed by the bidder in the last six months before the mandatory offer obligation being triggered is proposed to be continued. However, the Committee proposes a separate regulation setting out rules for calculating the offer price in cases where there is a need for an exception from the above main rule or where it is not possible or reasonable to use the main rule for calculating the offer price. In this regard, it is also being proposed that the offer price should be adjustable if the Takeover Supervisory Authority considers that (i) the stock prices during the period in question being kept at an artificial level, (ii) the stock purchase which is the basis for the offer price was not carried out on normal “commercial” terms, or (iii) the mandatory offer obligation is being triggered in connection with a restructuring of a company in serious financial distress. In case of adjustment of the offer price where the stock prices have been kept at an artificial level, or where the stock purchase which is the basis of the offer price was not made on normal “commercial” terms, the Committee proposes that the adjusted offer price shall be calculated on the basis of three-month volume-weighted average stock prices.

Further, the Committee proposes to introduce a general requirement that information published on a planned or submitted takeover offer must be correct, clear and not misleading. The scope of application is intended to be broad and comprises the preparation phase and after a bid is launched, and throughout the bidding phase.

The Committee also proposes a new right for the accepting stockholders to revoke their acceptances for a period limited to three trading days after a competing offer is made and disclosed, provided this occurs during the offer period for the original (first) offer.

Furthermore, the Committee proposes new rules on amending a tender offer, so that a bidder, prior to the expiry of the offer period, may amend the terms of such an offer in favour of the stockholders and also extend the offer period, provided the bidder has reserved such rights in the offer document itself and that such amendments are being approved by the Takeover Supervisory Authority.

The Committee does not propose to implement rules regulating the type of transaction agreements used in connection with takeovers of listed companies or similar commitments between a bidder and a Target company. Nevertheless, the Committee proposes to implement a rule into the new legislation that authorises the government to issue more detailed rules in a separate regulation to govern the use of such agreements in connection with mandatory and voluntary offers.

The takeover rules are also proposed to be amended to clarify the scope and applicability of such rules on companies domiciled in another country having issued stocks traded on a Norwegian regulated market. It is also proposed to introduce an obligation for companies domiciled outside the EEA to ensure that if such non-EEA company’s stocks are listed on a Norwegian regulated market, the company will have a special obligation to provide information on its website about the rights of its minority stockholders.

According to the proposal, the Takeover Supervisory Authority will be authorised to issue fines of up to NOK 10 million for natural persons and up to NOK 20 million for legal entities for violation of a number of key rules, or up to 2% of the total annual turnover in the last annual accounts for the same. If approved by the Parliament in the proposed form, this will, inter alia, apply to: the obligation to provide accurate, clear and non-misleading information in connection with an offer (prerequisites for presenting an offer); the obligation to provide notification of a mandatory offer or voluntary offer; and the obligation to make a mandatory or voluntary offer (requirement for the minimum offer price in mandatory offers), etc.

It is currently unclear when the Parliament can be expected to adopt these amendments into Norwegian legislation. However, we do not expect the proposed changes to be implemented in Norwegian law until 1 January 2020 at the earliest.

Prospectus Regulation

As a part of the capital markets union, the EU adopted in June 2017 a new Prospectus Regulation (EU 2017/1129) to improve the prospectus regime. The regulation has now replaced the Prospectus Directive (2003/71/EC). Under the new Prospectus Regulation, the requirements of a prospectus or equivalent document no longer apply to securities offered in connection with a takeover by means of an exchange offer, merger or a division, provided that a document is made available that contains information describing the transaction and its impact on the issuer. On 19 June 2018, the government-appointed Committee also delivered a new report in which it proposes amending the prospectus rules in the STA and in the STR by implementing the new Prospectus Regulation into Norwegian law. On 12 June 2019, the Parliament adopted a bill implementing the Prospectus Regulation into Norwegian law by amending chapter 7 of the STA. This amendment has now entered into force with effect from 21 June 2019.

Debt Pushdown

In early 2019, the Ministry of Trade, Industry and Fishery issued a consultation paper revisiting its previous proposal from February 2016, in which the Ministry proposed certain further easing of the Norwegian financial assistance prohibition rule. This proposal was issued together with certain other proposals to amend the rules of the Norwegian Companies Acts in order to implement EU directive (EU) 2017/828 into Norwegian law. In this consultation paper, the Ministry now, once again, has slightly revised its proposal to abolish the requirement that a buyer (borrower) must deposit “adequate security” towards the target company if the buyer receives financial assistance from the target in the form of security for the buyer’s acquisition financing. If adopted in its current proposed form, Norway will finally have a type of “whitewash” procedure that could also work for leveraged buyout (“LBO”) transactions. This is something that has been lacking under Norwegian law thus far. It is currently unclear when and whether the proposal will be implemented.

However, note that from 1 July 2014, private equity sponsors must always ensure they observe the new anti-asset stripping regime under the Norwegian Act on Alternative Investment Fund Managers (“AIFM”) when attempting to achieve a debt push-down. These rules may limit the sponsor’s ability to conduct debt push-downs, depending on the status of the target (listed or non-listed), the number of the target’s employees and the size of such target’s revenues or balance sheet.

New National Security Act adopted

In March 2018, the Parliament adopted a bill for a new National Security Act. This new act, grants the Government powers to intervene and stop acquisitions of shares in a company holding investments in sectors considered vital from a Norwegian national security perspective. The new act entered into force with effect from 1 January 2019 and, from such time, Norway has now implemented a national security review of acquisitions fairly similar with the type of review conducted by the US Committee of Foreign Investments.